Applying innovative food cost management practices in inflationary times

Abstract

PurposeIn the Indian context with an extended phase of high food inflation impacting the hospitality sector, there is a need for coping mechanisms to protect the business bottom line and maintain revenue growth. This need is even more pronounced within the budget restaurant segment. There is limited research that identifies the approach and innovative practices that food and beverage profit centers (hotels and restaurants) can deploy to handle the impact of the identified macroeconomic variable. The purpose of this paper is to probe the general approach and innovation that the budget segment may have used to survive the impact of a sustained increase in prices of food products and related raw materials.Design/methodology/approachA qualitative approach is adopted for this investigation, through a mix of in‐person or telephone interviews with operating managers (F&B manager, restaurant manager and chefs). The feedback from these sources provides an understanding of the responses of the budget segment to the stated issue of inflation in food products. The qualitative approach generates a spectrum of responses that helps to document some of the best practices that yielded good results, allowing the broader segment to emulate the same.FindingsThe research helps owners and operators to draw from innovative practices and approaches used to deliver improved fiscal performance in terms of managing food cost, without adversely impacting customer experience and overall business profitability.Research limitations/implicationsThere was a possibility that no clear indicators would emerge from the feedback, nonetheless the experiences that are documented through this research open doors for further research into innovative practices in managing food and beverage costs for improved profitability.Practical implicationsThe budget food and beverage sector in the Indian context has been dealing with high inflation of 14 ‐ 18 per cent on the supply side. A mix of strategic choices including passing the additional cost to end users, compromises in the form of diluting product quality or quantity (portion size) or unique process changes are also possible responses.Originality/valueThis paper lists best practices and also evaluates if there is any commonality emerging from the segment in terms of the “right approach” to manage food cost under prevailing inflationary conditions.